Tuesday, October 23, 2018
Politics

House, Senate have big differences to bridge on tax plans

WASHINGTON — Now that the House and the Senate have both released their tax bills, the hard part can begin: reconciling them.

For months, Republican leaders of the "Big Six" working group held weekly meetings so that the tax plans that they unveiled would be largely unified, making it possible for legislation to sail through Congress before the end of the year. But the House and Senate proposals diverge on important provisions that will be challenging for lawmakers to rectify in the coming weeks, in part because of competing political priorities facing lawmakers in each chamber.

Number of income tax brackets

Republicans originally wanted to collapse the tax brackets to three, from seven, in part to achieve their goal of simplifying the tax code so that people could file on a postcard. That proved difficult. The House plan went with four brackets: 12 percent, 25 percent, 35 percent and a top rate that stays at 39.6 percent for millionaires.

The Senate bill sticks with seven brackets of 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent and 35 percent but lowers the top rate to 38.5 percent for high-income individuals and couples.

State and local
tax deduction

Perhaps the thorniest issue thus far has been how to handle the state and local tax deduction, which allows people to deduct their state and local income, sales and property taxes. The House bill limits the deduction to just property taxes and caps it at $10,000.

The Senate plan eliminates the SALT deduction entirely, a move that could cause backlash from many upper-middle-class families and spook House members who have already objected to the more generous scaled-back version in their chamber.

Small-business treatment

Republicans are united in their desire to give small businesses a tax break, but their plans differ in how to provide a tax cut. House lawmakers created a new 25 percent tax for "pass-through" businesses — sole proprietorships, partnerships and S corporations that currently pay taxes at the individual rate of their owners. However, they erected guardrails to prevent the new rate from becoming a loophole that wealthy individuals can exploit by converting themselves into entities and flowing their income through at the rate of 25 percent.

The Senate takes a different approach, creating a new deduction for pass-through businesses along with other incentives to promote investment.

Mortgage interest deduction

Republicans in the House would cap the deduction for mortgage interest debt at $500,000, down from the current cap of $1 million.

Senate Republicans have decided to leave the deduction alone. If that holds, it would be a big victory for real estate lobbyists, who have been vocal in their opposition to changing the deduction, but that could make the House bill even more expensive.

Making the tax code more ‘America First’

A main priority of the Republican tax effort has been making the United States’ tax system more competitive so that companies invest here and do not have an incentive to shift profits to lower-tax jurisdictions. The Senate plan will impose taxes on U.S. and foreign companies that shift offshore money earned in the United States. There would be an effective minimum tax on money earned domestically and a 12.5 percent tax on foreign revenue from intellectual property.

The original House approach would have levied a 20 percent "excise tax" on payments between U.S. and foreign companies that are affiliated with each other. This idea set off substantial confusion and opposition from drug and insurance lobbyists and was tweaked during the Ways and Means Committee’s amendment process.

Cutting the corporate tax rate

Reducing the corporate tax rate to 20 percent, from 35 percent, is at the center of both the House and the Senate tax plans. How soon they get there is the only difference. The House bill immediately cuts the corporate tax rate, fulfilling the wishes of President Donald Trump.

The Senate imposes a one-year delay on lowering the rate, a move that allows Senate Republicans to preserve other deductions that the House eliminates. Economists have debated the effect that the delay will have on economic growth.

Adoption, education, health

To cut business and individual tax rates and double the standard deduction for individuals and families, Republicans had to do away with many popular tax credits and other prized deductions. The House initially eliminated a tax credit for adoptions but later restored it. It also repeals deductions for medical expenses and counts tuition waivers that are widely used by graduate students as taxable income.

In the Senate, Republicans also preserve the adoption tax credit. Unlike the House, they maintain the deduction for medical expenses and provide "education relief" for graduate students.

To repeal, or not to repeal, the estate tax

Almost all Republicans agree philosophically that the estate tax — or death tax as they call it — is unfair. But repealing it is costly, and the tax tends to hit only the very wealthy (and their heirs). House Republicans decided in their bill to double the amount of inherited wealth that is exempt from the tax to $11 million, from $5.5 million, and phase out the tax after six years.

In the Senate, the exemption is also doubled, but the tax never dies.

Comments
Trump says US will pull out of intermediate range nuke pact

Trump says US will pull out of intermediate range nuke pact

ELKO, Nevada — President Donald Trump says he will pull United States from the Intermediate-Range Nuclear Forces Treaty with Russia.Trump says Moscow has violated the agreement, but provided no details.The 1987 pact helps protect the security ...
Published: 10/20/18
Editorial: Those who fail to cast ballots in Hillsborough are running out of excuses

Editorial: Those who fail to cast ballots in Hillsborough are running out of excuses

You wouldn't skip a trip to the gas pump, would you?Then don't miss the chance to cast your general election ballot, either, when Hillsborough County opens its many early voting sites Monday morning for a two-week engagement.If you do your homework a...
Published: 10/19/18
Hernando commissioners face Democratic challengers, questions about contributions

Hernando commissioners face Democratic challengers, questions about contributions

Early voting begins Oct. 24.
Published: 10/19/18
Three weeks before election, tax foes organize to fight transportation measure

Three weeks before election, tax foes organize to fight transportation measure

TAMPA — No Tax for Tracks is putting the band back together.The group that campaigned against the failed 2010 transit referendum in Hillsborough has regrouped to fight a proposed penny-on-the-dollar sales tax hike for road, bus and transit projects. ...
Published: 10/19/18
Carlton: How a shortage of candor could tilt a commission race (Bribery scandal? What bribery scandal?)

Carlton: How a shortage of candor could tilt a commission race (Bribery scandal? What bribery scandal?)

In one of the most interesting local races around, first-time candidate Mariella Smith, a Democrat, looks like she’s got a longtime politician on the ropes.But forget, for a minute, that Smith’s opponent is veteran Republican Hillsborough County Comm...
Published: 10/19/18
Some of these Florida amendments aren’t worth your time

Some of these Florida amendments aren’t worth your time

For such a sacred document, we seem to give little thought to scribbling on, erasing and haphazardly expanding the Florida Constitution.Since a revised version was established in 1968, Florida voters have been asked to consider more than 175 differen...
Published: 10/18/18
Florida House District 67 candidates agree education is a priority, but disagree on what to do about it

Florida House District 67 candidates agree education is a priority, but disagree on what to do about it

Democrat Dawn Douglas says charter schools pull money from public education, while incumbent Republican Chris Latvala backed bill that sent construction money to charters.
Published: 10/18/18
In House 36, it's youthful incumbent vs. life-experienced activist

In House 36, it's youthful incumbent vs. life-experienced activist

Rep. Amber Mariano, R-Hudson, faces her first re-election test since her upset win two years ago.
Published: 10/18/18
Nevada’s famous pimp expected to win election despite death

Nevada’s famous pimp expected to win election despite death

LAS VEGAS — Nevada’s most famous pimp tried to bring the state’s legal brothel industry into the mainstream by mingling with celebrities, showcasing his business on HBO and staging outlandish publicity stunts.Dennis Hof’s fame made him an attention-g...
Published: 10/17/18
Daniel Ruth: For Hillsborough voters, transportation tax is leap of faith they can ponder while stuck in trafffic

Daniel Ruth: For Hillsborough voters, transportation tax is leap of faith they can ponder while stuck in trafffic

Perhaps one way to approach the ongoing community-wide debate over imposing a one-cent sales tax to pay for a variety of transportation needs is to think of all this dickering as a sort of family Thanksgiving dinner that has suddenly turned into a Th...
Published: 10/17/18